Nintendo chief helps group to be a big fish in a big, blue ocean
Satoru Iwata, the president of Nintendo and overseer of the hugely successful Wii, says the key is to find new shoals of consumers
“Intellectually, yes, this sounds obvious,” Mr Iwata says. “But within Nintendo, among the shareholders, everywhere, there was resistance. When I first raised the idea, in 2003, blue ocean strategy, nobody believed it was possible to broaden the games market.” Four years on, plenty of people believe it is. “Differentiation is everything” was, he says, the most important lesson passed to him by his predecessor, Hiroshi Yamauchi, who had led Nintendo for more than 50 years. There had been a few wrong calls: the toy vacuum cleaner that never caught on; the 1960s foray into taxis, and love hotels that fell flat. But against those, the group had been transformed from a playing cards company to a pioneer of arcade games and 3D graphics.
Advancing that legacy, in 2005 Mr Iwata launched the handheld DS. Touch-screen and voice-recognition technology made for a style of play unlike anything else on the market – and at a much lower price than its main rival, Sony’s PSP. [ blue ocean strategy ].
Nintendogs, a virtual pet game, was rolled out and snapped up by girls. Brain Training, billed as a cerebral workout, was launched for game-averse grown-ups. Each has since sold more than ten million copies. The DS itself has sold more than 40 million units (twice as many as the PSP) making it Nintendo’s best seller.
It is not only on the gaming side that Mr Iwata is challenging the conventional wisdom. Blue Ocean thinking, blue ocean strategy, says that “having a unique product is more important than an attractive price point,” he insists.
But with a reputation as a mean, even stingy, negotiator who is quite open to playing suppliers against each other to secure the best deal, it is not surprising he has also taken issue with his sector’s severe economics. “You must know when not to follow the traditional way of thinking,” he explains. “It is very odd to think that so many people still believe consoles have to make such huge losses at the start.” [ blue ocean strategy ].
Odd indeed, but for years manufacturers have developed and sold consoles as loss leaders in order to profit from larger margins on software later. In that tradition, Sony committed itself, at a cost of hundreds of millions of dollars, to co-developing the PlayStation 3’s powerful cell processor from scratch.
By contrast, for the follow-up to the DS, the Wii, Mr Iwata bought a much cheaper chip off the shelf. It has followed that games are much cheaper to make for the Wii, an advantage in attracting third-party games developers. One estimate puts the average Wii title budget at $5 million. The equivalent figure for the PS3 is put at four times that.
Largely because of Mr Iwata's thrifty innovation, analysts reckon that each Wii is being sold at a $50 profit. “It’s not as much as that, but it is making a profit,” he says. To put that into context, however, each PS3 is said to be making Sony a loss of up to $200.
Analysts reckon that the Wii is outselling the PlayStation 3 and Microsoft’s Xbox 360 by at least two to one. Mr Iwata says that he predicts 14 million will be sold this year.
This new dominance – when Mr Iwata took the job, Nintendo's GameCube was placed a poor third in a three-horse race – has been enough to make his rivals look fresh out of ideas. An exasperated Sony has already seen Nintendo, a company with an eighth of its revenues, surge fourfold in two years to match it in stock market value – 6.6 trillion yen (£27 billion) last month.
This week, in a move that smacked of panic, Sony slashed the price of the PS3 in the United States, to $500 from $600. “A very red-ocean act,” Mr Iwata describes it. (source from blue ocean strategy).
The big question is: how long can Nintendo stay ahead? “There is no doubt that our blue ocean will turn red,” Mr Iwata concedes. “Microsoft, for example, has made it clear that it wants to follow our success.”
There are also doubts over the longevity of the Wii. Sceptics say its core technology (that cheap chip) belongs to the last generation of machines and cannot be masked by a cute “magic wand” controller for too much longer. While the PS3 could be relevant for a decade, the Wii may struggle to avoid looking jaded much after 2010, they add (source from blue ocean strategy).
Mr Iwata says that he just does not know how long he has before the console is consigned to the great landfill of history. “We are planning for several eventualities,” he says. “But it is hard to know, as what we are doing is changing so much in the industry.”
In the meantime, he has just released three new cute controllers, including the Balance Board, a pressure-sensitive mat that tells players if they are overweight and monitors the effectiveness of an exercise regime. There is nothing else quite like it on the market. Mr Iwata is swimming hard, and against the tide again, to get to his next blue ocean (source from blue ocean strategy).
“Intellectually, yes, this sounds obvious,” Mr Iwata says. “But within Nintendo, among the shareholders, everywhere, there was resistance. When I first raised the idea, in 2003, nobody believed it was possible to broaden the games market.” Four years on, plenty of people believe it is. “Differentiation is everything” was, he says, the most important lesson passed to him by his predecessor, Hiroshi Yamauchi, who had led Nintendo for more than 50 years. There had been a few wrong calls: the toy vacuum cleaner that never caught on; the 1960s foray into taxis, and love hotels that fell flat. But against those, the group had been transformed from a playing cards company to a pioneer of arcade games and 3D graphics.
Advancing that legacy, in 2005 Mr Iwata launched the handheld DS. Touch-screen and voice-recognition technology made for a style of play unlike anything else on the market – and at a much lower price than its main rival, Sony’s PSP.
Nintendogs, a virtual pet game, was rolled out and snapped up by girls. Brain Training, billed as a cerebral workout, was launched for game-averse grown-ups. Each has since sold more than ten million copies. The DS itself has sold more than 40 million units (twice as many as the PSP) making it Nintendo’s best seller.
It is not only on the gaming side that Mr Iwata is challenging the conventional wisdom. Blue Ocean thinking, blue ocean strategy, says that “having a unique product is more important than an attractive price point,” he insists.
But with a reputation as a mean, even stingy, negotiator who is quite open to playing suppliers against each other to secure the best deal, it is not surprising he has also taken issue with his sector’s severe economics. “You must know when not to follow the traditional way of thinking,” he explains. “It is very odd to think that so many people still believe consoles have to make such huge losses at the start.”
Odd indeed, but for years manufacturers have developed and sold consoles as loss leaders in order to profit from larger margins on software later. In that tradition, Sony committed itself, at a cost of hundreds of millions of dollars, to co-developing the PlayStation 3’s powerful cell processor from scratch.
By contrast, for the follow-up to the DS, the Wii, Mr Iwata bought a much cheaper chip off the shelf. It has followed that games are much cheaper to make for the Wii, an advantage in attracting third-party games developers. One estimate puts the average Wii title budget at $5 million. The equivalent figure for the PS3 is put at four times that.
Largely because of Mr Iwata's thrifty innovation, analysts reckon that each Wii is being sold at a $50 profit. “It’s not as much as that, but it is making a profit,” he says. To put that into context, however, each PS3 is said to be making Sony a loss of up to $200.
Analysts reckon that the Wii is outselling the PlayStation 3 and Microsoft’s Xbox 360 by at least two to one. Mr Iwata says that he predicts 14 million will be sold this year.
This new dominance – when Mr Iwata took the job, Nintendo's GameCube was placed a poor third in a three-horse race – has been enough to make his rivals look fresh out of ideas. An exasperated Sony has already seen Nintendo, a company with an eighth of its revenues, surge fourfold in two years to match it in stock market value – 6.6 trillion yen (£27 billion) last month.
This week, in a move that smacked of panic, Sony slashed the price of the PS3 in the United States, to $500 from $600. “A very red-ocean act,” Mr Iwata describes it (source from blue ocean strategy).
The big question is: how long can Nintendo stay ahead? “There is no doubt that our blue ocean will turn red,” Mr Iwata concedes. “Microsoft, for example, has made it clear that it wants to follow our success.”
There are also doubts over the longevity of the Wii. Sceptics say its core technology (that cheap chip) belongs to the last generation of machines and cannot be masked by a cute “magic wand” controller for too much longer. While the PS3 could be relevant for a decade, the Wii may struggle to avoid looking jaded much after 2010, they add.
Mr Iwata says that he just does not know how long he has before the console is consigned to the great landfill of history. “We are planning for several eventualities,” he says. “But it is hard to know, as what we are doing is changing so much in the industry.”
In the meantime, he has just released three new cute controllers, including the Balance Board, a pressure-sensitive mat that tells players if they are overweight and monitors the effectiveness of an exercise regime. There is nothing else quite like it on the market. Mr Iwata is swimming hard, and against the tide again, to get to his next blue ocean.
Source: http://business.timesonline.co.uk
31 July 2007
Nintendo chief helps group to be a big fish in a big, blue ocean
Get savvy in newer media, says Kotler in New Straits Times, Malaysia, article
Get savvy in newer media, says Kotler in New Straits Times, Malaysia, article
July 10, 2007 - ASIAN marketers, including those in Malaysia, need to acquire skills in using newer media such as blogs, podcasts, and buzz marketing, says international marketing guru Dr Philip Kotler.
"Asian companies need a better understanding of the role that the marketing department can play in turning customer insights into profitable growth.
"They need to improve their strategic capabilities with Blue Ocean thinking and Lateral Marketing," he said in an email interview with Business Times recently.
Companies that employ Blue Ocean strategy use innovation to find uncontested "blue oceans of opportunities" that their competitors have yet to discover, while lateral marketing requires companies to look beyond narrow, vertical segmentation and be creative to create fresh ideas and new markets.
Kotler, one of the pioneers in the marketing world, said Asian companies must study the practices of foreign global companies that have entered their market.
He said if Asian companies discover that they are deficient in certain marketing skills such as digital marketing, experiential marketing and direct marketing, they need to quickly acquire the missing skills to level the competitive playing field.
On the difference in marketing culture between Asia and the West, Kotler said Asian marketers tend to find out more about the buyers before sitting down for business talk.
"My impression is that Asian marketers, especially those selling more expensive, less frequently purchased products, want to know more about the buyer and his trustworthiness and character. They prefer not to go immediately into business talk but first find out more about the whole person," he said.
Kotler, who currently teaches at Northwestern University, observes that the current marketing trend and challenge lies in the proliferation of products, promotions, and marketing channels.
He said each product category contains a growing number of brands and consumers are confronted with advertisements everywhere they turn.
"They can buy at retail or order online, and in both cases, face a multitude of vendors. Thus the main problem for a company is how to stand out from the crowd, how to grab a few minutes of someone's attention," he said.
Kotler said marketing covers all the tools that can be used to build a strong preference for a particular company or product. Marketers use segmentation, targeting, positioning, and the 4Ps - product, price, place, promotion - to achieve profitable growth.
To build a new brand, he said, a company relies on marketing research and creative promotional tools to develop a memorable name, logo, slogan, look, and value proposition.
"Once the brand is well-established, the company must make sure that its brand strategy guides all of the company's activities," he said.
Kotler, 76, whose marketing textbook is used in graduate business schools worldwide, will be in Kuala Lumpur on August 13 for a one-day talk hosted by the Institute of Marketing Malaysia.
© New Straits Times (Malaysia), July 7, 2007
What makes blue ocean strategy imperative in today's business environment?
What makes blue ocean strategy imperative in today's business environment?
Prospects in most established market spaces (red oceans) are shrinking steadily. Technological advances have substantially improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services. And as trade barriers between nations and regions fall and information on products and prices becomes instantly and globally available, niche markets and monopoly havens are continuing to disappear. At the same time, there is little evidence of any increase in demand, at least in the developed markets, where recent United Nations statistics even point to declining populations.
The result is that in more and more industries, supply is overtaking demand. This situation has inevitably hastened the commoditization of products and services, stoked price wars, and shrunk profit margins. According to recent studies, major American brands in a variety of product and service categories have become more and more alike. And as brands become more similar, people increasingly base purchase choices on price. People no longer insist, as in the past, that their laundry detergent be Tide. Nor do they necessarily stick to Colgate when there is a special promotion for Crest, and vice versa. In overcrowded industries, differentiating brands becomes harder both in economic upturns and in downturns.
As products and services increasingly become commodities in overcrowded industries and companies’ profitable growth shrinks, companies are driven to compete principally on cost. One result of this has been the rising exodus of jobs to low cost countries like India and China as companies increasingly engage in outsourcing. While governments may seek to solve the issue of outsourcing through legislation, history teaches us that this is not a long-term solution. The long-term solution to creating jobs is in companies creating compelling products and services that take them out of the vicious cycle of commodity competition. This means moving companies’ products and services from the red ocean to the blue ocean. These issues alone make blue ocean strategy a rising imperative for CEOs.
Source: http://www.blueoceanstrategy.com
Are you true blue or bloody red?
Are you true blue or bloody red?
Is your company facing heightened competition from domestic and international rivals?
Do your sales representatives increasingly argue they need to offer deeper and deeper price discounts to make sales?
Are you finding you need to advertise more to get noticed in the marketplace, yet the impact of each advertising dollar spent is falling?
Is your company focused more on cost cutting, quality control, and brand management at the expense of growth, innovation, and brand creation?
Do you blame your slow growth on your market?
Do you see outsourcing to low cost companies or countries as a principal prerequisite to regain competitiveness?
Are mergers and acquisitions the principal means your company sees to grow?
Is it easier to get funding to match a strategic move made by your competitor than it is to get internal funding to support a strategic move that allows you to break away from the competition?
Is commoditization of offerings a frequent worry of your company?
List your key competitive factors; now list your competition’s. Are they largely the same?
If you answered yes to a majority of these questions, then your company is stuck in the red ocean.
Blue Ocean Strategy offers you a way to swim out of the red ocean filled with sharks. It presents a theory, tools, and frameworks to allow your company to break away from the competition and create a blue ocean of new market space.
Source: http://www.blueoceanstrategy.com
What is Blue Ocean Strategy?
Blue Ocean Strategy - Nine Key Points of Blue Ocean Strategy (BOS)
- Blue Ocean Strategy BOS is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).
- Blue Ocean Strategy BOS is the simultaneous pursuit of differentiation and low cost.
- The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.
- BOS offers a set of methodologies and tools to create new market space.
- While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers – as argued by Schumpeter and his followers – BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms.
- Blue Ocean Strategy BOS frameworks and tools include: strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map, and blue ocean idea index.
These frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication. - BOS covers both strategy formulation and strategy execution.
- The three key conceptual building blocks of Blue Ocean Strategy BOS are: value innovation, tipping point leadership, and fair process.
